UK Buy to Let Mortgage Solution

[Aussiepom]

Hi All,

I've been reading posts for many months now where people have struggled with the restrictions around providing UK buy-to-let mortgages to UK expats in Australia.  Largely the difficulties arise because the mortgage provider is required to be regulated both in the UK and Australia, meaning they need a presence in both countries.  This significantly limits the size of the market.  Prices for these products quoted to me by brokers have been much higher than equivalent products provided to UK residents.  Further the broker fees have been in the thousands, not hundreds.  This might be a familiar story for some of you, or at least it will become thus in the not too distant future.

The good news is that I've just had a really positive experience on this front.  After speaking to many brokers and being provided with higher level interest rates and exorbitant broker fees, i was able to find a solution that was equivalent to what i would pay and receive in UK.  I've just completed on the mortgage. The answer was that I engaged directly with HSBC UK.  The only difficulty was the fact that I had to do it all myself without a broker.  On the flip side it gave me access to exactly the same products UK residents receive.  In doing so i'm saving a lot of money and have been able to secure a long term fixed rate mortgage so I can carry on out here in Australia and not have to deal with this headache again for quite some time.

To the details.  HSBC offer 2 avenues for mortgages to Ex pats in Australia:

The first route is via an Ex Pat mortgage through HSBC Expat.  This one was prohibitive for us as it requires a certain amount of capital (i believe it was £60k+, maybe more) to set up an HSBC offshore expat account.  This might be appropriate for someone with money sat around.

The second route is via a regular buy-to-let mortgage route.  The website link is here:  https://www.hsbc.co.uk/1/2/mortgages/buy-to-let-mortgages

Please note the eligibility criteria. Critically you need to have lived in the house at some point since you bought it for at least 6 months - so this mortgage doesn't suit you if you are an overseas landlord looking to buy an investment buy-to-let.  Also when we applied as an overseas landlord the minimum annual salary requirement (single or joint, depending on the application), was £75k - although i cannot find the requirement on their website anymore so perhaps things have changed since we started the process in January.  They also say that the rent must be 145% of the mortgage repayments.  I'm not sure whether this has changed since we started our application but they were only looking for 145% of the interest portion of our capital repayment mortgage when we applied.

The whole process took about 8 weeks from start to finish and it was painful because of the speed of mail and general lack of competence of some of HSBC staff.  Note that we had to get some documents notarised here in Australia which cost about $150.  The only document that we actually had to send by post was the signed mortgage deed.  Everything else we were able to scan and send.  We had our managing agent for the UK property issue the current tenancy agreement directly to the conveyancing company which was acceptable.

This was a welcome relief to us, we are able to save at least £200 a month on what the brokers were quoting with this HSBC product, which over the long term is a really meaningful saving.

I'd be more than happy to answer any questions or provide additional feedback on the process if anyone's interested.  

Cheers,

 

The Ozzie Pom

This post has been promoted to an article
Edited March 14, 2018 by Aussiepom
Updated some typos

[Guest The Pom Queen]

What a great article thank you for sharing your experience especially as this comes up regularly.

[Aussiepom]

You're welcome

Here's the detailed lending criteria:

http://www.intermediaries.hsbc.co.uk/criteria/buy-to-let-lending-criteria.html

Cheers,

Aussie Pom

[Aussiepom]

Just bumping this - i'd be keen to know if others have or are on the path to benefiting from this?

[Coops13]

Hi Aussiepom....

Thanks for the post and I'm hoping this could be a help to me.  Just arrived home to a letter advising me that my mortgage has passed the end of it's term.  I will review the details tonight and will definitely be in touch.

Cheers

S

[Aussiepom]

All the best - btw it seems based on the feedback of others on the forum that applying for the mortgage over the phone might be easier.  Be warned calling UK 0800 numbers might be expensive even if your phone plan includes UK landline / mobile minutes.  Calling UK 0800 numbers is free from skype

[QuantitySurveyor]

Thanks for this. I'm in the UK on holiday at moment, leave next week. Quick question - do you have to be an existing customer with a UK account ? ta.  Pete

[Aussiepom]

I had previously been an HSBC customer but was not one at the time of application.  It may be that my status as a previous customer eased the process of ID verification or AML requirements but i just don't know i'm afraid.  Perhaps go in and have a chat with them, see what they say?

 

[QuantitySurveyor]

Thanks, I have a phone call arranged to go through the initial process, will keep everyone up to speed.

[QuantitySurveyor]

Little update.

So, after a bit of confusion with HSBC, we are now on the path of the application. The confusion was firstly dealing with a local branch, who did not think we could qualify, but put us onto the Expat team based in Jersey. This would mean opening a Premier Account with minimum 60k GBP. Fortunately for us, we have had a good innings in Australia and had sufficient funds to get over this hurdle (we have been saving hard). 

We were approved in principle for a Buy to Let Mortgage. We were then asked, since we live in Australia we may wish to deal with the Hong Kong team due to the time issues. We organised this via the HK team. Things were getting a bit stressful due to having to wait to get an appointment and we lost 2+ weeks from our initial phone call to HSBC. We were advised the mortgage would take 8-10 weeks to complete. Our present mortgage term expires in mid October.

When we spoke to HK while back in Oz, we were advised by a really switched on chap, that we did not have to open a premier account, as long we had a UK bank account we could organise the mortgage via the UK. When I explained we did not have an HSBC UK bank account, I was advised this did not matter, as long as we had an account with any UK bank, we could apply for Buy to Let mortgage through HSBC. I was then transferred directly to the UK at HSBC expense (as they called me) and spoke to a mortgage adviser in the UK who ran through our financials. We are underway.

As Aussiepom has explained, it get's stressful as this appears to be the only option, and you keep expecting to hear "computer says no" but so far so good. We have to send in the usual pay slips, insurances etc. and HSBC will take care of everything including the legals and valuation. When I asked, I was advised it will take 3-6 weeks to complete the mortgage.

I still feel nervous and anxious, but it just seems to be so easy, after 12 months of googling and trying to work out what to do. Thanks Aussiepom. You have fed me a lifeline.

Eternally grateful, pomsinoz has been a fantastic resource - from the beginnings 8 years ago on applying for a visa, the process, and citizenship, and also the legal/financials from guys like Alan Collett and John from Moneycorp.

Will keep you posted.

Edited August 11, 2018 by QuantitySurveyor

[Aussiepom]

Great Update QuantitySurveyor.  Glad to see some positive progress.  Wishing you all the best with it.

[Aussiepom]

22 minutes ago, bolus said:

Hey there, I had to remortgage a few years ago. UK lander (First Direct) threw their toys out of the pram when they found out I was abroad and wouldn't re-mortgage.

There are lots of very expensive options. Only reasonable one I found was HSBC expat. Their rates aren't as good as UK hughstreet, but they are not 4%+ with huge arrangement fees that some people are offering. 

HSBC expat are excellent. Only downside is the money you have to keep on deposit. 

If you find anything better, please post it, I'd be really interested, thanks. 

HI There,

I wrote an article about this approx 2 years go:

At that time (and presumably now), subject to conditions, you are able to purchase a UK mortgage through HSBC.  I.E. a product for the UK highstreetnot an expat through their expat division.  I did have to hang up and call again a few times to get past idiots but it was possible and I wasn't the only one on this forum successful. 

 

[matre123]

Hi guys, 

My wife and I have just started on the Australia train and debating what to do when we get over there. I want to sell our 2 houses and start a fresh in Australia but the wife thinks we should keep them and rent them out. The idea of having a bit of income from 2 houses is certainly appealing when starting a new life where our salaries may not be what we hope. 

I can see that it is a headache organising the mortgage as an expat but how do you find the tenant situation and issues with the house etc? We live in 1 house and rent the other and just recently had our tenant leave and bring in the new one. The council are chasing me for money between tenants and energy companies are wanting cash as well. We paid for an estate agent to find the first tenant we had and when they handed in their notice I organised the next one with new contract etc and whenever there is a problem I have a look first before getting people in. 

There's also the tax scenario which is confusing to say the least. How do you guys deal with you income tax and also property management?

Any info would be greatly appreciated thanks! 

[Guest The Pom Queen]

1 hour ago, matre123 said:

Hi guys, 

My wife and I have just started on the Australia train and debating what to do when we get over there. I want to sell our 2 houses and start a fresh in Australia but the wife thinks we should keep them and rent them out. The idea of having a bit of income from 2 houses is certainly appealing when starting a new life where our salaries may not be what we hope. 

I can see that it is a headache organising the mortgage as an expat but how do you find the tenant situation and issues with the house etc? We live in 1 house and rent the other and just recently had our tenant leave and bring in the new one. The council are chasing me for money between tenants and energy companies are wanting cash as well. We paid for an estate agent to find the first tenant we had and when they handed in their notice I organised the next one with new contract etc and whenever there is a problem I have a look first before getting people in. 

There's also the tax scenario which is confusing to say the least. How do you guys deal with you income tax and also property management?

Any info would be greatly appreciated thanks! 

Hi @matre123 it’s a tough one. @Alan Collett will be able to advise on the tax side of things. 
‘I suppose it depends on what visa you are on, if it’s temporary then personally I’d keep them both, if permanent I’d probably sell one and rent out the other. 
‘You have to remember that if you kept both yes you would have the income but you would be paying rent over here which would cancel it out. I don’t know what the rental income is in the UK, rents here vary tremendously depending on how many bedrooms and where you will settle

[matre123]

Thank you for your reply. I think your idea of sell one and rent out the other makes sense to me. We could use the money on the sale to help with deposit over here and still have another property with some income. As a general question I am wondering how long it has taken folk to buy once they make the move to Australia given it costs so much to get there in the first place!? 

Again, any information that can be provided would be greatly appreciated.

[FirstWorldProblems]

We find it to be minimally profitable.  By the time tax has been taken, agent fees paid and we refresh the decor between tenants, it tends to work out no better than just putting the money with an investment manager.  However we stick with it because we expect the capital growth from house price to be where we make gains.  With the potential eradication of capital gains tax (to be replaced with income tax), that is becoming less appealing. 
 

In your situation I’d probably make my decision based on; 1) what happens with capital gains and 2) the GBP:AUD exchange rate 

[matre123]

Thanks for this. I did read something the other day regarding capital gains tax, are they getting rid of it so it would be a better idea to sell the property as opposed to keep and get stiffed with potentially more income tax?

[FirstWorldProblems]

No one knows.  The Office for Tax Simplification recently recommended the Chancellor increase CGT rates in line with rates of income tax, as well as making inherited assets subject to both CGT and inheritance tax.  Perhaps distracted by Covid and Brexit, the Chancellor has not announced any changes.  Newspapers report lots of  landlords to be selling off their assets in fear of an announcement in the 3rd March spring budget  that would come into force for the new tax year. I can’t speak to the veracity of those claims. 
 

However this is definitely the case for business owners. I am involved in acquisitions on behalf of my employer and we have seen an overwhelming volume of businesses come to market in these past 6 months. Admittedly a number of those are Brexit uncertainty related but the potential capital gains tax changes are another major driver. 

[Aussiepom]

On 01/01/2021 at 23:38, matre123 said:

Hi guys, 

My wife and I have just started on the Australia train and debating what to do when we get over there. I want to sell our 2 houses and start a fresh in Australia but the wife thinks we should keep them and rent them out. The idea of having a bit of income from 2 houses is certainly appealing when starting a new life where our salaries may not be what we hope. 

I can see that it is a headache organising the mortgage as an expat but how do you find the tenant situation and issues with the house etc? We live in 1 house and rent the other and just recently had our tenant leave and bring in the new one. The council are chasing me for money between tenants and energy companies are wanting cash as well. We paid for an estate agent to find the first tenant we had and when they handed in their notice I organised the next one with new contract etc and whenever there is a problem I have a look first before getting people in. 

There's also the tax scenario which is confusing to say the least. How do you guys deal with you income tax and also property management?

Any info would be greatly appreciated thanks! 

Really does depend on your long term objectives.  We want to keep our UK property because we may want to use it in the distant future and we're quite happy with it slowly paying itself off.  In terms of dealing with the headaches of renting.  We use a fully managed letting service which means that all the annoying things get dealt with by the letting agent, we just have to cough up money when things change.  It's no big deal for us and they're a trustworthy ARLA registered agent.  The mortgage interest we pay is deductible here which is nice as it was being reduced just when we left the UK.

In terms of income tax, we went through Alan Collett (and the firm he works with) for the Aussie returns, we do our own UK self assessment tax.  Our only UK income is from property (total income is less than our joint UK tax free threshold) and it's pretty easy to do once you know how to do it.

[Marisawright]

On 01/01/2021 at 23:38, matre123 said:

My wife and I have just started on the Australia train and debating what to do when we get over there. I want to sell our 2 houses and start a fresh in Australia but the wife thinks we should keep them and rent them out. ...

I can see that it is a headache organising the mortgage as an expat .....

 

The solution is easy.  Don't even try to organise a mortgage as an expat, because you'll get stung for higher fees and interest.    Get your mortgage sorted while you're still resident in the UK.  You don't have to tell the bank you might have plans to leave the country at some point in the future. 

The bigger question is, what kind of visa are you coming on, and are you 150% positive you'll be staying in Australia for the rest of your lives?   

If you're coming on a temporary, short-term or provisional visa (482, 491 etc), then it's much wiser not to sell your home, because there is no guarantee you'll be allowed to stay in Oz at the end of the visa.  People talk about transitioning from these visas to PR as if it's just a formality but it certainly is not!    There are hoops to jump through and sometimes it doesn't work out.

Same goes if you're going for a PR visa (189, 190) but don't have any experience of living in Australia.  It may surprise you to learn that some people arrive and discover they don't like it, or miss their folks or friends too much.  If either of you is in any doubt, having a home to go back to will save you a lot of expense. 

My two cents - sell the rental property and make sure the sale completes well before you leave the UK (that will avoid complications with Aussie tax on the sale).  Keep your home and rent it out, using a good letting agent.  And as Aussiepom says, you need to hire a tax agent who knows both systems thoroughly, to do your Australian tax return.   @Alan Collett is one such. 

[Chortlepuss]

I’d add - you may want to remortgage your UK property if the mortgage is low to release funds to buy a property here - we paid off our UK rental property and have a mortgage on our house here which is dumb as we can’t offset any interest against rental income so pay more tax on the rental proceeds

also if your rental is quite a new property, get a depreciation report done - well worth the outlay (we used Washington Brown)

[rammygirl]

Be careful. If you re mortgage to purchase another property then that amount can’t be offset against tax. You can’t have your cake and eat it according to the ATO

[Peach]

I'd also be careful with 'not telling the bank'. I noticed a new 'failure to declare reportable facts' clause, when I renewed the landlord's insurance this time around.  A reportable fact being anything the insurance company might be interested to know.  My interpretation was should you make a claim and had not already told the insurance company that the bank didn't know you were overseas or the mortgage was still residential, then that would be reason for them to not pay out.  

[Marisawright]

1 hour ago, Peach said:

I'd also be careful with 'not telling the bank'. I noticed a new 'failure to declare reportable facts' clause, when I renewed the landlord's insurance this time around.  A reportable fact being anything the insurance company might be interested to know.  My interpretation was should you make a claim and had not already told the insurance company that the bank didn't know you were overseas or the mortgage was still residential, then that would be reason for them to not pay out.  

I wasn’t suggesting they lie, just to get their finances in order while they can honestly claim to be still legally resident in the country

[Ken]

30 minutes ago, Marisawright said:

I wasn’t suggesting they lie, just to get their finances in order while they can honestly claim to be still legally resident in the country

Some lenders have a written policy on what happens if you take out a residential mortgage and then convert to a buy-to-let. Some allow it, some have a fixed additional fee or rate and others prohibit it.